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Lawsuit accuses car industry of inflating prices

A class-action lawsuit launched in Toronto accuses major automakers and dealers of violating competition and consumer protection laws by conspiring to artificially inflate car prices in Canada.

Juroviesky and Ricci LLP have filed the suit in Ontario Superior Court.

Lawyer Henry Juroviesky told CTV.ca on Wednesday that prices are being inflated by automakers that tell U.S. dealers not to sell to Canadians.

"They dissuade and threaten their dealers from selling...(Canadians) cars," said Juroviesky.

"What that does is artificially inflate the prices of cars in Canada -- it does not allow the prices to fall to their natural level."

Bruce Cran, president of the Consumers' Association of Canada, said he hopes the lawsuit will inspire tougher laws to protect prospective buyers.

"I think we need laws with teeth to stop this stuff from going on," he told CTV News.

Juroviesky denounced dealer tactics, such as voiding warranties, used to stop cross-border shoppers.

"If a car in Canada is sold for $35,000, and you could go to Buffalo, New York and buy it for $25,000, then according to the natural rules of competition the price in Canada should fall to avoid you from going to Buffalo," said Juroviesky.

He said transportation costs should be the only add-on for cars sold in Canada.

Juroviesky said he got involved in the lawsuit after working with a company that helps Canadian auto dealers go to the U.S. to finance cars.

"The dealers came back and said 'We cannot get our hands on new cars,'" he said. "We started investigating why and we saw that the auto manufacturers have put these impediments in front of Canadians to... keep their prices higher."

Dealers in the past have used the large gap between the Canadian dollar and U.S. greenback to justify the higher prices in Canada, said Juroviesky.

"Now that the dollar is at parity they can't use that cloud... to mask what they're doing," he said.

U.S. lawsuits

Meanwhile, class-action suits in the U.S. -- launched in 2003 against automakers and dealer organizations -- are currently being heard in a court in Maine.

The lawsuits -- which came at a time when the Canadian dollar was valued in the 65-cent US range -- were launched after Americans crossing the border to buy cars were denied warranty coverage.

The lawsuits argue that the failure to honour warranties denied Americans the benefits of lower prices.

Juroviesky said it will take about nine months to find out if the lawsuit his firm filed will be certified. If it is, the lawsuit will include all people that bought or leased cars in Canada from 2005 to 2007.

The statement of claim names as defendants:

General Motors Corp., General Motors of Canada Ltd., American Honda Motor Co. Inc., Honda Canada Inc., Chrysler Canada Inc., Chrysler LLC, Nissan North America Inc., Nissan Canada Inc., along with the Canadian Automobile Dealers Association and the National Automobile Dealers Association in the United States.

The firm also plans to add Toyota and Ford, including their Canadian units, once it has signed up representative plaintiffs for each one.

Still, a recent study that compared car sales on both sides of the border found that price gaps are narrowing.

"In all of our 'popular' segments ... the price gap between Canada and the U.S. narrowed in 2007," said industry analyst Dennis DesRosiers, who compiled the study.